Returns to Skills and Personnel Management: U.S. Department of Defense Scientists and Engineers

Personnel records are used to examine compensation, recruitment, and retention of a group of highly skilled workers: civilian scientists and engineers in U.S. Department of Defense laboratories. In contrast to those of the private sector, returns to skills were largely flat for this group from 1982 to 1996. Despite this, quality and performance of recruits relative to earlier cohorts, and of those retained relative to those who left, remained stable. One explanation is the importance of defense industry--specific human capital. These results hold for three different pay plans, including the federal government's primary plan and two intended to introduce greater flexibility in personnel management. (JEL J31, J44, J45, M52) Copyright 2006, Oxford University Press.